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EW

EXP World Holdings, Inc. (EXPI)·Q1 2023 Earnings Summary

Executive Summary

  • Q1 2023 delivered resilience in a weak housing market: revenue fell 16% year over year to $0.851B, but EXPI posted positive net income of $1.5M, $0.01 diluted EPS, and $13.3M adjusted EBITDA amid strong operating cash flow generation .
  • Gross profit fell to $73.1M and agent count rose 12% YoY to 87,327, with International Realty achieving record revenue (+52% YoY) and Virbela up 19% YoY, highlighting diversified growth levers despite macro headwinds .
  • Management reiterated focus on market share gains, lead-gen partnerships (Zoocasa, Realty.com), and AI-driven efficiency, while maintaining dividends ($0.045/share) and repurchasing ~$29.9M of stock in Q1 .
  • Consensus estimates from S&P Global were not available for Q1 2023 at time of preparation; comparisons vs Street cannot be assessed and should be updated when accessible (see Estimates Context).

What Went Well and What Went Wrong

What Went Well

  • Positive net income and strong cash generation: $1.5M net income, $13.3M adjusted EBITDA, ~$56.1M operating cash flow (and ~$39M excluding customer deposit changes), demonstrating the variable cost model’s durability in a downturn .
  • International and Virbela momentum: International Realty posted record revenue (+52% YoY to $10.8M) and Virbela grew 19% YoY, while North America remained profitable with $21.2M segment EBITDA .
  • Strategic initiatives: Expanded agent-centric platform via partnerships (Realty.com), Zoocasa lead network expansion, and launch of eXp Ventures to invest in synergistic tech (including AI) .
    • Quote: “During the first quarter, the financial benefits of our variable cost model were apparent as we generated positive net income and over $39 million of operating cash flow despite the global residential real estate market downturn.” – CFO Jeff Whiteside .

What Went Wrong

  • Macro-driven top-line pressure: Revenue decreased 16% YoY to $0.851B; transactions down 10% to 102,305 and volume down 20% to $33.2B, reflecting higher rates and weaker industry activity .
  • Profitability compression vs prior year: Gross profit fell 12% YoY to $73.1M; EPS declined to $0.01 from $0.06; consolidated adjusted EBITDA down to $13.3M from $17.7M in Q1 2022 .
  • International EBITDA loss widened: International Realty segment adjusted EBITDA was -$3.7M (vs -$2.0M a year ago), as the company continues to invest to scale overseas markets .
    • Analyst concern: Reclassification of stock-based comp impacted OpEx and gross margin presentation; CFO quantified ~$7.8M year-over-year reallocation to cost of revenues, complicating modeling of OpEx durability .

Financial Results

MetricQ3 2022Q4 2022Q1 2023
Revenue ($USD Billions)$1.239 $0.933 $0.851
Gross Profit ($USD Millions)$93.1 $83.1 $73.1
Net Income ($USD Millions)$4.402 ($7.201) $1.453
Diluted EPS ($USD)$0.03 ($0.05) $0.01
Adjusted EBITDA ($USD Millions)$12.3 $3.6 $13.3
Operating Cash Flow ($USD Millions)$64.1 $38.0 $56.144
MarginsQ3 2022Q4 2022Q1 2023
Gross Margin %7.5% 8.9% — (CFO said +33 bps YoY)
Segment Revenues ($USD Millions)Q4 2022Q1 2023
North American Realty$920.7 $837.1
International Realty$9.8 $10.8
Virbela$2.3 $2.2
Other Affiliated Services$1.8 $1.7
Segment Eliminations($1.1) ($1.1)
Consolidated Revenues$933.4 $850.6
Adjusted Segment EBITDA ($USD Millions)Q4 2022Q1 2023
North American Realty$12.140 $21.203
International Realty($4.124) ($3.676)
Virbela($0.958) ($1.296)
Other Affiliated Services($0.461) ($0.681)
Corporate & Other($3.019) ($2.223)
Consolidated Adjusted EBITDA$3.578 $13.327
KPIsQ3 2022Q4 2022Q1 2023
Agent Count84,911 86,203 87,327
Transactions138,354 109,168 102,305
Transaction Volume ($USD Billions)$50.4 $37.6 $33.2
Global NPS (Agents)71 73 70

Notes:

  • Operating cash flow of ~$39M cited by management excludes change in customer deposits; GAAP operating cash flow was $56.1M in Q1 2023 .
  • Gross margin % in Q1 2023 was described qualitatively (+33 bps YoY) without a precise percentage disclosed .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Cash Dividend per ShareQ2 2023$0.045 (Q1 2023 declared) $0.045 declared April 27, payable May 31, record May 12 Maintained
SG&A Run-rateFY 2023Target ~$80M per quarter (communicated post-Q3) “Numbers will go up but not dramatically”; invest opportunistically (qualitative) Maintained qualitatively
Agent Count OutlookFY 2023 YE—Around 95,000 by year-end (may be slightly optimistic) New qualitative target
International Expansion Pace2023+Entered 22 markets; slowed in H2’22 Aim to approach 4–5 new countries per year later in 2023, while optimizing country profitability Resuming measured pace

No quantitative guidance was provided for revenue, margins, OI&E, or tax rate in Q1 2023; management emphasized focus on market share, agent value proposition, and strategic investments .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2022, Q4 2022)Current Period (Q1 2023)Trend
AI / Technology efficiencyMention of Virbela/Frame, platform productivity; planning for cost structure flexibility Offsite on AI; expect AI to reduce operating costs and enhance agent economics over time Increasing focus
Macro/Interest RatesAnticipated tough industry in H2’22 and 2023; market down >30% in Q4 2022 Q1 industry sides down ~25% YoY; EXPI sides down ~16% but market share up Persistent headwind
Lead-gen/PartnershipsLaunch Zoocasa; Realty.com partnership; Revenos referrals Realty.com partnership scaled; Zoocasa referral network expanding into US Scaling
International Strategy22 markets, investing despite losses; some countries near/breakeven (UK, Australia, South Africa) Record quarter; focus on country-level profitability; 18–24 months path to country breakeven Maturing
Margins/Gross ProfitGross margin % rose to 8.9% in Q4; cushion via fewer agents hitting caps Gross margin % described as +33 bps YoY; gross profit dollars down on weaker volume Stable-to-slight improvement
SG&A DisciplineReduced hiring; annual SG&A target ~$360M and ~$80M/qtr run-rate Durable, flexible cost base; OpEx won’t “dramatically” rise; invest strategically Controlled
Dividends/BuybacksMaintained dividend; $60M Q3 buybacks; $179.5M FY22 buybacks Q2 dividend declared; ~$29.9M buyback in Q1; ~2.3M shares repurchased Ongoing returns

Management Commentary

  • “Our cloud-based model and solid financial foundation enable us to continue investing in synergistic products and technologies that lay the groundwork for the future, while delivering an enhanced agent experience today.” – Glenn Sanford, CEO .
  • “International Realty segment had a record revenue quarter with 52% year-over-year growth, and we remain focused on driving durable, profitable growth across the eXp World Holdings portfolio.” – Jeff Whiteside, CFO .
  • “Even in what’s historically the worst quarter of the year, we were able to actually have a little bit of net income and our adjusted EBITDA was positive.” – Glenn Sanford .
  • “Operating cash flow of $38.8M... our North American revenue declined only 6% YoY versus an industry-wide sales decline at 25%.” – Jeff Whiteside .
  • On AI: “We were looking at how AI is going to impact our business… drive down brokerage costs, then opportunities to drive down some of the costs from an agent perspective while providing the same or better benefits.” – Glenn Sanford .

Q&A Highlights

  • OpEx reclassification: CFO quantified ~$7.8M year-over-year reallocation of stock-based comp to cost of revenues, affecting modeled OpEx and gross margin presentation .
  • SG&A outlook: Durable sequential downtrend from Q4; flexibility to invest, but not expected to rise “dramatically” near term .
  • Success Lending: Still a drag in current rate environment; building nationwide infrastructure; expect accretive contribution as rates normalize, potentially by Q3 .
  • Gross margin dynamics: Percentage tends to rise when industry volumes decline (fewer agents hitting caps), then normalizes as activity improves .
  • Share repurchases: ~2.3M shares repurchased in Q1 2023; ~$29.9M buybacks referenced .

Estimates Context

  • Street consensus (S&P Global) for Q1 2023 EPS/Revenue/EBITDA was not available at time of writing due to access limitations; therefore, beat/miss vs estimates cannot be assessed and should be updated when accessible.
    • Attempted S&P Global retrieval returned errors (daily limit exceeded), so consensus comparison is unavailable and not included.
MetricQ1 2023 ActualQ1 2023 S&P Global Consensus
Revenue ($USD Billions)$0.851 N/A
Diluted EPS ($USD)$0.01 N/A
Adjusted EBITDA ($USD Millions)$13.3 N/A

Key Takeaways for Investors

  • EXPI’s variable-cost, agent-centric model is exhibiting downside protection: positive net income and strong operating cash flow in a tough quarter, with gross margin resilience when volumes decline .
  • International is a visible growth driver with record revenue and select markets approaching profitability; expect continued investment with a country-level profitability focus over 18–24 months per market .
  • Lead-gen and partnerships (Zoocasa, Realty.com) plus AI-enabled efficiency initiatives could support agent economics and share gains through 2023, providing near-term catalysts as implementations scale .
  • Capital returns remain active: dividend maintained at $0.045/share and ~$29.9M Q1 buybacks (~2.3M shares), offering support in a volatile macro backdrop .
  • Modeling notes: watch gross margin % behavior vs volume and the impact of stock-based comp reclassification on OpEx; Q1 commentary suggests limited near-term OpEx growth with selective investment .
  • Near-term trading: stock may react to proof points on agent share gains and international momentum vs macro headwinds (transactions/volume); updates on AI initiatives and lead-gen monetization could be incremental positives .
  • Medium-term thesis: Continued market share accumulation and maturing international portfolio, combined with ancillary services scaling (Success Coaching, lending/title/escrow), can expand margins and diversify earnings through the cycle .